There are currently 1,000 firms in a competitive industry. Minimum long-run average cost is $80 and price $100. Explain what will happen to price, profit, and the number of firms in this industry over time.
What will be an ideal response?
Price exceeds minimum long-run average cost, so that firms are earning an economic profit. This will induce additional entry over time. As the market supply increases (rightward shift), price will fall to minimum long-run average cost of $80. Economic profit will drop to zero.
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What will be an ideal response?
If you have private information that you are a safer driver than your record indicates, you are likely to buy an insurance policy with
A) a higher than average deductible. B) a positive but lower than average deductible. C) an average deductible. D) no deductible.
Window cleaners that work the top floors of high-rise office buildings are, on average, paid approximately 30 percent more an hour than those that clean windows on the bottom floor. This is an example of
a. non-pecuniary job benefits. b. compensating wage differentials. c. irrational wage compensation. d. employment discrimination.
In long-run equilibrium a purely competitive firm will operate where price is:
A. greater than MC and minimum ATC but equal to MR. B. greater than MR and MC but equal to minimum ATC. C. equal to MR, MC, and minimum ATC. D. greater than MR but equal to MC and minimum ATC.